India is planning to phase out the mandatory blending of imported coal in thermal power plants (TPPs) as part of a long-term strategy to reduce coal imports. Government sources told CNBC-TV18 recently that the current blending mandate discourages the use of domestic coal in favor of imported coal, which involves coal beneficiation to remove impurities and enhance its calorific value.
With new government regulations allowing the power sector to procure coal based on 100% of its Annual Contracted Quantity (ACQ), sources indicated that sufficient domestic coal is now available. Coal imports have largely been driven by convenience rather than necessity. Reports also suggest that reduced downtime for thermal power plants will lead to more predictable power generation.
Last year, India’s Power Ministry defended the decision to approve coal imports during periods of increased power demand. The government explained that thermal power plant coal stocks would have been depleted by September 2022 without the imports for blending.
Coal imports for blending fluctuated between a peak of 47.6 million tonnes (MT) in FY16 and 23.8 MT in FY20. In 2020, the Power Ministry urged states to reduce blending imports, leading to a decline to 8.1 MT in FY22.
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However, due to a rise in power demand, in December 2021, the government instructed state power generation companies (gencos) to import up to 4%, and central gencos up to 10%, of their coal requirements for FY23. In October 2023, the Power Ministry extended the directive for all gencos to continue blending imports at a minimum of 6% by weight until March 2024, with an extension to October 15, 2024, at 4% by weight.
To further bolster the country’s energy security, the Coal Ministry is working to reduce coal imports and increase exports, leveraging the rise in domestic production.
In FY24, India's coal production rose by 11.65%, reaching 997.26 MT, surpassing the previous year's figure of 893.19 MT. The ministry has set an ambitious target of 1,080 MT for FY25.
Domestic coal production and supply meet the majority of India’s coal demand. In FY24, coal demand increased to 1,233.86 MT, compared to 1,115.04 MT in FY23. The growth rate of domestic coal production is expected to remain at 6-7% annually, aiming for approximately 1.5 billion tonnes by FY30.
Editing by Reiner Simanjuntak
